EMEA Morning Briefing: Stock Futures Rise Amid Tech Optimism; Powell Speech Awaited

MARKET WRAPS

Watch For:

EU money supply in euro area; Germany GfK consumer climate survey; trading updates from H&M, Old Mutual, Halma

Opening Call:

European stock futures advanced, as strength in tech stocks boosted sentiment. Asian stock benchmarks gained; the dollar and Treasury yields steadied; oil futures rose and gold edged lower.

Equities:

Stock futures advanced, tracking Asian equities higher amid fresh signs of strength in technology stocks, after Micron stock jumped in late trading following the company's strong earnings.

The memory-chip maker cited AI demand in posting better-than-expected quarterly results and issued guidance ahead of Wall Street expectations.

Economic data could play a bigger role in driving markets over the remainder of the week. German consumer sentiment and U.S. jobless claims are on the docket for later Thursday, as well as speeches by a number of Federal Reserve officials, including Chair Jerome Powell.

Forex:

The dollar could weaken amid Fed rate-cut hopes. A weaker-than-expected U.S. Conference Board consumer confidence reading, together with a cooling labor market, are a growing worry among policymakers and investors, said Lloyd Chan, senior currency analyst at MUFG Bank.

Markets are currently pricing in a 59% chance of another large 50bp rate cut by the Fed at the November meeting, Chan added.

Bonds:

The Fed's half-point rate cut last week is already observably working to ease financial conditions, Deutsche Bank said. The bank's financial-conditions index--a high-frequency version of an indicator that the Fed itself publishes--has eased considerably since before last week's Fed meeting to reach its lowest levels since 2022.

In addition to the Fed's rate cut itself, downstream aftershocks such as falling mortgage rates, lower Treasury yields, lower rates on new corporate borrowing and a weaker dollar are all combining to ease the economy's broad financing burden, Deutsche Bank said. Easing continued this week "as Fedspeak seemed to convey that the bar for further 50bp cuts may be lower," it added.

Energy:

Oil futures advanced in Asia, supported by a fall in U.S. stockpiles. The EIA reported that U.S. commercial crude inventories declined for a second week in row, by 4.5 million barrels for the week ended Sept. 20. The data are seemingly bullish for oil, said Fawad Razaqzada, market analyst at City Index and FOREX.com.

However, this week's U.S. economic data has been "far from great," casting a shadow over the demand outlook for the world's biggest oil-consuming country, he added.

Metals:

Gold is still robust as expectations for further monetary easing by the Fed grow, said Joseph Dahrieh, managing principal at Tickmill.

Data released earlier this week showed a bigger-than-expected decline in U.S. consumer confidence, reinforcing dovish remarks from Fed officials, Dahrieh said. Hence, markets now expect 75 bps worth of rate cuts by year-end, with their focus now on coming data such as the PCE price index, the Fed's preferred inflation measure, Dahrieh added.

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Copper prices rose slightly in early Asian trade as sentiment continued to be buoyed by China's stimulus measures. The stimulus released by the People's Bank of China this week has supported market sentiment on copper, Citic Futures said.

Tightening supply and higher demand ahead of China's national holiday in October have also given a boost to prices, it added. Citic forecasts a continuing rebound in copper prices over the near term.

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Iron ore has extended a rally on hopes that China's recent huge stimulus package would prompt more demand, ANZ said. "The market will now be watching for signs that the measures are translating into a real pick--up in demand for steel and iron-ore" in China, ANZ said.

TODAY'S TOP HEADLINES

Fed's Kugler Sees Plenty More Rate Cuts Ahead

Federal Reserve Gov. Adriana Kugler expects a series of interest-rate cuts ahead, justified by declining inflation and a cooling labor market. She sees a resilient-but-slowing U.S. economy that the Fed doesn't want to weaken any further.

"While future actions...will depend on data we receive on inflation, employment, and economic activity, if conditions continue to evolve in the direction traveled thus far, then additional cuts will be appropriate," Kugler said on Wednesday, speaking at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School in Cambridge, Mass.

Congress Approves Bill Averting Government Shutdown Before Election

WASHINGTON-The House and Senate passed a measure late Wednesday funding federal agencies until late December, voting overwhelmingly to take a politically risky government shutdown off the table until after the election.

House lawmakers voted 341 to 82 to approve the measure, despite continued grumbling from some rank-and-file GOP members over the lack of spending cuts and leaders' routine use of short-term patches. Under fast-track procedures employed by Republican leaders to bypass disagreements within the party, the measure required a two-thirds supermajority.

China Market Support May Fizzle Out If Key Issues Remain Unsolved

China's over $100 billion push to bolster its stock markets has stirred optimism, but begs the question of whether investors and businesses will take the bait amid lingering doubts about the economy's underlying weakness.

In an unprecedented move, the People's Bank of China vowed to invest 800 billion yuan of liquidity, equivalent to $113.77 billion, into Chinese stock markets through new swap and loan facilities, a move cautiously welcomed by analysts.

Stocks are poised for something that hasn't happened since the days of the dot-com bubble

The S&P 500 is flirting with what would be a rare accomplishment: rising 20% or more during two consecutive calendar years.

At least, that was the case as of Tuesday's close, when the U.S. benchmark saw its year-to-date advance top 20% for the first time since the start of 2024, according to Dow Jones Market Data. The achievement happened to coincide with the index's 41st record close of the year.

DP World Is Seeking to Build a Trade Hub in Mexico

Port terminal operator DP World is talking to Mexico's government about allowing it to start operations in the country, which would enable the Dubai-based business to handle cargo heading into the U.S. from the south.

DP World hasn't been able to extend its ambitious global growth plan to the U.S. since hitting political roadblocks some two decades ago. Instead, it has invested in five terminals on Canada's East and West coasts that feed into the U.S. from the north.

U.K. Car Manufacturing Falls Sharply Amid Factory Transitions for EVs

U.K. car manufacturing fell sharply in August as companies continued to retool their factories for new electric models, in line with forecasts for a global slowdown in auto production this year.

Overall production fell 8.4% on year to 41,271 cars, the Society of Motor Manufacturers & Traders said Wednesday.

U.S. and Allies Call for Three-Week Pause to Head Off Israel-Hezbollah Ground War

WASHINGTON-The Biden administration is urgently pressing for Israel and Hezbollah to pause their escalating aerial attacks into and from Lebanon for 21 days, hoping to head off a full-scale ground war that appears increasingly likely, according to U.S. officials.

The U.S.-brokered plan calls for a halt in the fighting that would last several weeks, one of the officials said.

Micron Stock Jumps on Strong Outlook. 'Robust AI Demand' Is Boosting Chip Revenue.

Micron Technology stock jumped in late trading on Wednesday after the company reported strong earnings and provided guidance above Wall Street expectations.

For the quarter ending Aug. 29, the memory chip maker reported revenue of $7.75 billion-up 93% versus the prior year-and adjusted earnings of $1.18 per share. Wall Street was expecting revenue of $7.65 billion with adjusted EPS of $1.11.

OpenAI to Become For-Profit Company

OpenAI is planning to convert from a nonprofit organization to a for-profit company at the same time it is undergoing major personnel shifts including the abrupt resignation Wednesday of its chief technology officer, Mira Murati.

Becoming a for-profit would be a seismic shift for OpenAI, which was founded in 2015 to develop AI technology "to benefit humanity as a whole, unconstrained by a need to generate financial return," according to a statement it published when it launched.

The Celebrities Lending Their Voices to Meta's New AI

Meta Platforms is splashing out on celebrity star power to persuade users to embrace new artificial-intelligence tools.

The tech company announced deals with actors Awkwafina, John Cena, Judi Dench, Kristen Bell and Keegan-Michael Key on Wednesday that will allow it to use their voices in a new AI assistant. Meta is paying stars millions of dollars for use of their likeness, people familiar with the negotiations said.

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Expected Major Events for Thursday

06:00/DEN: Aug Central Government Finance & Debt

06:00/NOR: Aug Labour force survey SA, incl unemployment

06:00/SWE: Aug Foreign trade

06:00/GER: Sep GfK consumer climate survey

07:00/SVK: Aug PPI

07:00/SWE: Sep Monthly Business Tendency Survey

07:00/SWE: Sep Consumer Tendency Survey

07:00/SPN: Aug Retail Sales

07:30/SWI: Swiss National Bank monetary policy assessment

08:00/EU: Aug Monetary developments in the euro area (M3)

08:00/AUT: Sep Austria Manufacturing PMI

08:00/ITA: Sep Consumer Confidence Survey

08:00/ITA: Sep Business Confidence Survey

08:00/GER: ifo Joint Economic Forecast of German economic research institutes

08:30/UK: Aug Capital issuance statistics

17:59/POR: Jul ICSG Copper Report

17:59/UK: REC JobsOutlook survey

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September 26, 2024 00:17 ET (04:17 GMT)

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